The National Flood Insurance Program (NFIP) has been extended through Nov. 30 following the passage of the latest in a series of congressional bills written to keep the program going. The vote and the bill’s signing came on the day the program was set to expire.
Numerous financial trade organizations long have advocated for a long-term reauthorization plan to avoid future instances where the plan could come dangerously close to lapsing, which could adversely impact the housing market.
“I want to commend Congress for passing this short-term extension of the NFIP,” Mortgage Bankers Association President and CEO David Stevens said in a statement. “This will protect residential and commercial real estate markets from potential harm, and provide stability for those that sell and administer the policies to millions of Americans. MBA now calls on Congress to negotiate a long-term reauthorization of the NFIP which provides certainty and protections for consumers, expands the private flood insurance market, and exempts commercial/multifamily properties from NFIP mandatory purchase requirements.”
The Independent Community Bankers of America (ICBA) proposes increasing private-market participation to help set the program on “sound financial footing while keeping rates affordable.” That association also stated its opposition to removing the mandatory purchase requirement for commercial properties, asserting that doing so would put community banks at a disadvantage to regional and national banks when making loans in flood zones.
“Affordable and readily available flood insurance is vital for the more than 20,000 communities across the United States that depend on the National Flood Insurance Program,” ICBA President and CEO Rebeca Romero Rainey said in a press release. “A long-term reauthorization of the NFIP is needed to ensure coverage remains available to affected communities and to avoid further disruptions to the market.”
American Bankers Association (ABA) President and CEO Rob Nichols thanked House leaders in a statement following the 366-52 vote in the House, stressing his organization’s assertion that preventing a suspension of the program is essential to provide certainty for lenders and borrowers during the upcoming hurricane season.
“If there is a lapse, many loan closings in high-risk areas will be delayed or otherwise complicated, resulting in additional costs and borrower frustrations,” Nichols commented. He added that “ABA strongly supports both a long-term reauthorization of the program and necessary reforms that will make the NFIP more sustainable, while also balancing concerns over availability and affordability.”
The Senate voted 86-12 to pass the legislation.
Trade associations representing credit unions noted their support for the NFIP but asserted that there is too much compliance burden associated with flood insurance regulations, particularly for smaller lenders. The Credit Union National Association (CUNA) said any increase in civil money penalties would increase this burden even further.
“It is vital that flood insurance premiums remain affordable so that credit union members in parts of the country where this type of insurance is required are not shut out of the opportunity to own a home,” CUNA President and CEO Jim Nussle said a the release.
Various trade associations and other entities expressed their concerns regarding a potential lapse in the program in a joint letter to House leaders prior to the vote, noting the adverse impact of the two brief program suspensions in 2017.
“A lapse of the NFIP, especially during the height of hurricane season, will leave millions of Americans at risk and result in severe disruption in the over 20,000 communities across the United States that depend on the NFIP. Furthermore, a lapse in the NFIP may slow down recovery efforts in Texas, Louisiana, Florida, Puerto Rico and other states impacted by the devastating 2017 hurricane season by making it harder for disaster assistance recipients to satisfy flood insurance requirements.”
The bill proposes the seventh in a series of stop-gap extensions intended to keep the program funded until a long-term plan is approved.
Among the trades to endorse the letter were ABA, the American Land Title Association, the Independent Community Bankers of America, the Mortgage Bankers Association, the National Association of Home Builders, the National Association of Insurance and Financial Advisors, the National Association of Realtors and the U.S. Chamber of Commerce.
The National Association of Realtors (NAR) has advocated for the bill’s proposed reforms that would gradually phase out NFIP subsidies, and improving the alignment between rates and risk, particularly for inland and lower-value properties. NAR also supports the bill’s policy reforms regarding repeatedly flooding properties, which comprise 2 percent of NFIP policies but 25 percent of claim payments.
“Current law calls for subsidies for high-risk properties to be phased out entirely, a policy which has been publicly supported by the NAR and would be accelerated under the 21st Century Flood Reform Act,” NAR President Elizabeth Mendenhall wrote in an op-ed for The Wall Street Journal. “The bill passed the House but is stalled in the Senate.”
The program is more than $20 billion in debt to the Treasury Department, and received $16 billion in funds to enable it to aid people affected by Hurricane Harvey last year.
Many interested parties, both in Congress and out, are skeptical of how realistic a compromise is in the near future.
“We need to reform this program, but we also need to keep it alive through the end of hurricane season,” Sen. John Kennedy (R-La.) said in a statement. “People have been living near the water since Moby Dick was a minnow. ... A reauthorization gives us time to make meaningful changes without scaring 5 million Americans half to death.”
“History does not provide the public with very much encouragement with regard to actually getting some reforms done,” Sen. Roger Wicker (R-Miss.) said in a statement.
The bill to keep the NFIP temporarily afloat passed within hours of the program’s scheduled expiration as Senate Majority Leader Mitch McConnell (R-Ky.) was forced to file cloture on the House legislation.
McConnell canceled a procedural vote the day before the program’s expiration date, electing to schedule a final vote the following day, allowing the measure to be sent to the White House for signing not long before the midnight deadline.